Two years on since the introduction of Costs Management, MRN start off 2016 by looking at the latest Costs Budgeting guidance and tell you, in a nutshell, what you can learn from it.
Excelerate Technology Ltd v Lindsey Cumberbatch and red Foot (2015)
The court may not consider application for varying costs budgets once the costs had been incurred (and no contingencies had provided for such an increase). However, the court could ‘record’ a note upon the reasonableness and proportionality of such additional incurred costs for the purposes of any detailed assessment.
However, quite how such a ‘record’ will be applied by a cost judge on a detailed assessment remains to be seen.
If you are the party seeking to obtain such a ‘record’ you should think long and hard about what the judge is likely to do. Do the potentially substantial benefits of obtaining such a ‘record’ outweigh the risk of the court dismissing such an application? Would you have better prospects pursuing a similar argument before a costs judge on the assessment?
CIP Properties (AIPT) Limited v Galiford Try Infrastructure Limited (2015)
If a court determines that the incurred costs already exceed the reasonable and proportionate amount the entire proceedings, and the budget was unreliable, it has various options open to it.
In the above case, the court decided the only workable option was to set budget figures for each of the stages, and for the amount approved for estimated costs to be adjusted depending on the amount allowed for the incurred costs on an assessment.
This decision could render the rules relating to incurred costs practically redundant – the approach adopted by the court was almost equivalent to fixing incurred costs.
Steven James Redfern v Corby Borough Council (2014)
Judges are entitled to fix upon a provisional figure which would have been reasonable and proportionate for the entire costs of the action and then work backwards from there taking into account the incurred costs and considering the amount left over. An example, a judge may consider £100,000.00 for the entire costs of the action to be reasonable and therefore if the Budget claims incurred costs of £50,000.00, the judge will consider it reasonable to allow £50,000.000 for the estimated costs.
This decision will be very helpful for parties challenging budgets as it gives the court a ready method to make significant reductions even where many of the costs have been incurred. It wouldn’t however be helpful, if a judge feels the incurred costs exceed or already meet the valuation already placed on the overall action.
Yeo v Times Newspapers Limited (2015)
In respect of contingencies: (a) they must involve work that does not fall within the main categories on Precedent H; (b) in order for work to qualify as a contingency it must be possible to identify to the opposite party and the court what that work would be; (c) work should only be included as a contingency if it is foreseen as more likely than not to be required.
If work that falls outside one of the main categories is not thought probable, it can reasonably and should be excluded from the Budget.
Parties might want to seize upon the ‘probability’ test, both at the approval of budgets stage and if it is said a contingency should have been included but was missed.
In the above case of CIP Properties (AIPT) Limited v Galiford Try Infrastructure Limited (2015), no sum was allowed for further CMCs “because they may not be necessary”. It is unclear how this sits with ‘probability’ test for contingencies.